Blurb
The Finance Ministry warned that El Nino could fuel inflation and slow growth, though strong food stocks and reservoir levels provide a cushion
New Delhi
The Finance Ministry has cautioned that the possible development of El Nino conditions during the 2026 monsoon season could intensify existing inflationary pressures and affect economic activity, even as strong food grain stocks and healthy reservoir levels provide some protection against potential disruptions.
According to the ministry’s Monthly Economic Review for May, deficient rainfall resulting from El Nino could quickly impact food inflation, rural demand and overall economic growth. The report noted that these risks come at a time when global energy prices remain elevated, adding to inflationary concerns.
The review, however, highlighted several positive indicators. Food grain buffer stocks are currently at comfortable levels, with rice and wheat stocks held by the Food Corporation of India and state agencies reaching 817.53 lakh tonnes at the end of April 2026. Reservoir storage levels were also strong, standing at 123.86 per cent of the decadal average ahead of the monsoon season.
Agricultural activity has shown encouraging signs, with summer crop sowing expanding to 83.08 lakh hectares compared to 80.01 lakh hectares during the same period last year. These factors are expected to provide some resilience against possible weather-related disruptions.
The India Meteorological Department has indicated a likely transition from ENSO-neutral conditions to El Nino during the 2026 monsoon season. Overall rainfall is projected at around 92 per cent of the Long Period Average, though there remains a significant possibility of below-normal rainfall depending on interactions with other climatic factors.
The review noted that rice production has historically remained relatively stable during strong El Nino years due to extensive irrigation coverage. However, pulses and oilseeds, which are largely cultivated in rainfed areas, remain vulnerable to rainfall deficiencies.
While domestic automobile sales continue to show robust growth across segments, a decline in air passenger traffic and concerns over a weaker monsoon suggest that consumption demand may face challenges in the months ahead.
